Does the CBOE takeover of BATS go against the spirit of MiFID?

From expanding into more asset classes, to offering new ETFs, currencies and cash stocks trading, there is no question the US$3.2bn acquisition of BATs provides CBOE with a truly global multi asset one-stop shop.

CBOE will benefit from new revenue streams from the fastest growing markets. Recent estimates also suggest that by using BATS technology, CBOE will make annual cost savings in the region of US$65m. Everything is certainly rosy in the CBOE garden.

But given the fact that many initial post-crisis regulations aimed to increase exchange competition as opposed to reducing it, what knock-on effect will a deal of this magnitude have on European market structure?

Sylvia Smit, Head of Equity Markets Delivery at Delta Capita, explains that to answer this question, it is worth looking back before fully assessing what could lie ahead.

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Insurance 2017: What Maslow Means for Keeping Customers

Many firms apply Maslow’s hierarchy of needs to seduce customers – but stop once a sale is made. Why not continue?

Explaining customer needs through the theory of Maslow is common practice. Marketers often apply the principles to attract new customers. However, if you fail to continue to do this once you have attracted a customer, your ability to retain them will be compromised.

In this article, Onno Bloemers, Delta Capita Insurance Lead, suggests an approach that takes into account the position of the client within the needs pyramid. After all, if you understand the initial need that has led to a buying decision, you can continue to apply this to retain your customers.

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Priips has resulted in co-operation between ultra-competitive banks

They say good things come to those who wait, and market participants have certainly had to be patient as first the Markets in Financial Instruments Directive (Mifid II) and then, at the eleventh hour, the Packaged Retail and Insurance-based Investment Products (Priips) regulation was put back for another year. Joe Channer, CEO of Delta Capita, describes how the waiting could soon be over, with a revised Priips RTS now imminent, coupled with a Mifid II deadline of January 2018 locked down.

The existing delays have already come at a cost to the industry; take the uncertainty surrounding the timing of Priips as a classic case in point. The structured products industry had accepted the Priips regulation as a positive step, invested significant effort to be ready for delivery and had their minds set on January 1, 2017 as the deadline.

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Ch-ch-ch changes in Asset Management “Asia Asset Management” Feature by Atul Arora

A true innovator who revolutionised an industry – the late, great David Bowie has much more in common with the wealth management sector than one might think. And it’s not just the creation of Bowie Bonds, which allowed people to invest in the singer’s future earnings, that connects the Starman with the world of finance and structured products.

Today, the Bowies of the wealth management industry are the disruptive tech firms – who are increasingly chipping away at the bigger player’s market dominance. It’s not hard to see why, as diversification is currently the name of the game – and no investor wants to put all their eggs in one basket. This in turn gives rise to more opportunities for the newer players in the market, looking at providing differentiated services at a cheaper cost.

The modern-day investors are much more savvy and better informed, and they prefer to have at least three or four specialist wealth managers looking after part of their money. For example, they may want to let a manager strong in emerging markets to manage their emerging market exposure, and at the same time use a completely different manager for their expertise in Japanese equities or US government debt. In today’s low-interest rate environment, investors understand the positive effect specialists can have on returns. One of the platform provider calls this (jokingly) Newton’s 4th law, which states that the “investors will invariably diversify”. This diversity of choice has in turn given rise to plethora of disruptive technology innovators entering the market – ranging from stand-alone robo advisers to solutions that aggregate client reporting.

Reporting aggregation solutions have been driven primarily by the desire of the investors to see their overall exposure in one report. Given the fact that these reports from various wealth managers run into tens of pages, and have been produced using archaic systems (and poor quality data), there are invariably errors that investors have got used to over time. With the latest technology stack and no “IT Debt” (legacy IT Infrastructure), investors have been able to benefit from higher quality aggregated reports.

Some of these aggregators have taken the offering further and have started to analyse the deluge of data they have access to in the form of these reports. They have diversified into upstream “robo wealth advisory” and have been able to create much more customised portfolios for the investors. Combining the cost advantage robo-advisory offers along with the usage of big-data and analytics to better match the risk/return/liquidity profile of the investors, these ‘new kids on the block’ have been able to consistently deliver an additional 30-40 basis points of returns to their investors. Their value proposition is becoming increasingly difficult to ignore with every passing day.

The demand for automated (low cost) advice, as well as aggregated and accurate reporting will continue to grow as the 2017 progresses. It’s up to the established players to decide how they want to respond to these challengers. Do they want to build competitive technology in-house, or buy services/technology from these challengers (white labelling or otherwise), or acquire one of these challengers outright? Is the organisation ready for any one of the responses better than the others? There are questions to be answered and decisions to be made, urgently.

Firms that continue to innovate and reinvent themselves like the recently departed Bowie, will be best placed to maintain their pole position as well as improve their market share. Turning and facing the technology ch-ch-changes may well be the only option traditional wealth management powerhouses have got to keep pace with the nimbleness of the competition.

Click here to view this article on the ‘Asia Asset Management – The Journal of Investments & Pensions’ website.

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Insurance 2017: A Journey Toward Self-Disruption

Insurers are aware that they may need to change their business models, but are current initiatives sufficiently grounded? Onno Bloemers, Delta Capita Insurance Lead, suggests more of ‘the right stuff’ might be required in order to overcome innovation obstacles.

Last year, an EIOPA stress test revealed that a large portion of European insurers remain vulnerable for one or both of the tested scenarios. At the same time, insurers continue to struggle with a constant shift in customer expectations. We are all used to seamlessly working digitally in more and more aspects of our lives, and we’ve come to expect the same treatment when it comes to insurance.

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Clock synchronisation…time is ticking

MiFID II’s clock synchronisation rules have given the buy-side plenty to think about, Hayley McDowell looks at the challenges and how technology is helping.

In August this year, UBS signed an agreement with the National Physical Laboratory in the UK to implement its time accuracy technology, ahead of regulatory synchronisation reporting requirements. The technology was described as ‘atomic’, with the laboratory currently operating two of the world’s most accurate clocks – accurate to one second every 158 million years.

The global co-head of equity electronic agency trading at UBS, Chris McConville, said at the time the clock would “provide UBS infrastructure with a stable, accurate and resilient time signal, whilst simplifying the MiFID II time synchronisation traceability requirements.”

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Worth more than the paper it’s written on

Can collateral optimisation work if legal agreement execution remains pedestrian? Bimal Umeria and Jonathan Adams of Delta Capita take a look

The slow, fragmented and manual process of changing legal agreements increases risk for all market participants. One consequence of multi-jurisdictional business growth, product diversity and increasing regulation is that the contractual process becomes more fluid. Legal agreements, their annexes and addenda require regular review and change. This has led to an increase in administrative burden and legal costs for all participants in the securities finance industry. […]

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Too early for the buy side?

Awareness building is imperative to ensure that collateral management efficiency is given focus so that is can have an impact on the bottom line, according to Jonathan Adams of Delta Capita.

Earlier in 2016, it was reported that despite some considerable investment and development of collateral management applications, utilities and services, there was very little take up by the buy side. This is a significant finding given the potential benefits for asset management firms to further mobilise portfolio assets for day-to-day requirements such as managing liquidity risk and meeting margin call obligations. […]

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The Ability to Constantly Learn, Change, and Execute: Digital Transformation

Paul’s Growing Digital Understanding

Paul is an executive manager in financial services and just came back from a business trip to Singapore, where he was inspired by workshops about Digital Transformation. On the flight home he had plenty of time to consider his personal as well as his professional digital awareness.

Paul was born 45 years ago, in 1970, an era where there was no digital at all. His first memory of media and communications are over 40 years old and all about analogue models: a world in which radio, tv, newspapers, shopping, doing business, banking and all other things had nothing to do with each other. Each of them was an isolated island, a physical world that was relatively easy to understand, with physical restrictions, strict opening times and lots of paper work. […]

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ESMA guidance on Mifid II comes just in time

Giles Kenwright, head of regulatory advisory at Delta Capita, reacts to ESMA’s latest Q&A on Mifid II, as market participants face a race against the clock just over a year out from implementation. 

Hot on the heels of the FCA’s consultation paper at the start of this month, ESMA Q&A guidance for Mifid II undoubtedly removes a good chunk of ambiguity. Until now, the previously released RTS documents, which outlined the conceptual framework for Mifid II, were often far too vague to allow business or technical solutions to be implemented.

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